Beijing is likely to come under more significant pressure to implement stimulus measures as key parts of the consumer economy slow. With growth remaining lethargic in the U.S. and Euro zone, China’s consumers are badly needed to pick up the slack. But the data over the last two quarters suggest that China’s consumer class is also becoming a bit less sure about the future, and guarding their wallets accordingly. …

The slowdown in sales of key consumer goods is a telling element of today’s larger China market story: growth that might seem reasonable or even impressive in mature Western economies, but that is a significant comedown from China’s largely pedal-to-the-metal growth since reforms began in 1978. The Chinese Communist Party’s legitimacy and policies revolve around robust economic growth and the slowdown poses a major challenge for China’s fifth-generation leadership, poised to assume power at the 18th Party Congress this October.

The old growth model that worked so well in many ways for the past three decades has largely run out of gas, a new model based on greater consumer demand will be hard to implement because of strong vested interests that join political and economic power to degrees unparalleled in the West, and global demand for Chinese exports appears likely to remain disappointing for at least the next 12 months. Major policy changes in Beijing are unlikely as everyone waits for China’s next paramount leader, Xi Jinping, to consolidate power and build consensus behind the policies he will pursue. …